How to Avoid Losing Money on Bad Investments

Investing money can be very lucrative, but as you may be well aware, it does carry a significant amount of risk too. This can be especially true if you are putting your trust in someone else to manage your portfolio with little to no involvement in the actual handling of your investments. No one wants to get into a situation where they have been taken advantage of and their entire savings has been flushed down the drain—that is the point when investment fraud attorneys need to get involved and the whole situation gets messy. This is not to say that you can’t have someone managing your portfolio, just that you need to make smart decisions about your investments. Here are some tips to avoid disaster when it comes to the future of your investments.

Don’t Put All of Your Eggs in One Basket

You may have a really great feeling about this one investment opportunity, but you should never dump all of your money into one investment option, says eHow. One of the most effective ways of avoiding losing all of your money is to diversify your holdings as much as possible, that way, you can stand to lose in one area from time to time because the other investments can make up for losses in other areas. If you put all of your money into the rubber chicken industry and suddenly, the rubber chicken industry goes belly-up, you will then lose all of that money because you didn’t diversify.

Buying High and Selling Low

The point of the stock market is to invest your money in industries that are going to help you to turn a profit. You may be surprised that many people make the mistake of buying when prices are high or selling when prices begin to drop, says U.S. News Money. This is a big mistake, because if you buy high, there is a chance that the stocks will never increase beyond that value. You run the risk of buying at an all-time high, and the stocks will only drop from there. Also, if you start to sell when prices drop rather than ride out the wave until prices bounce back, then you just lose that money; you don’t get another chance to get it back. At least if you leave it in you have the chance of a recovery, although you do still run the risk that they will drop further– but that is a risk you chose when you decide to invest in stocks.

 Know When to Fold

Do not allow yourself to be bullied in your investments by your portfolio manager, because they may be leading you down a dangerous path. If you do find yourself in troubled waters, you may need to speak to an investment fraud attorney to get out from underneath. It is not a situation anyone wants to find themselves in, so invest smart, stay educated on your investments, and know when enough is enough. Remember that this is your money and your portfolio, you are in charge.

Alexandra White is an investment banker and avid blogger.

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